PACRA Maintains Entity Ratings of Al-Abbas Sugar Mills Limited
The ratings of Al-Abbas Sugar Mills Ltd (Al-Abbas) emanates from fortified position in its respective lines of business. The company drives its strength from diversified revenue streams – sugar, ethanol and storage terminals – enabling it to cope up with the sugar price volatility. While sugar is characterized by stable demand supported by fundamentals, ethanol takes benefit of the value addition that it signifies as a product. Sugar prices have remained depressed for an extended period of time on account of surplus availability of the commodity in the country. This has depressed relevant margins. Meanwhile, volumetric increase in ethanol division and stable income from storage terminals supports bottom-line. The de-leveraged balance sheet (from long term loans perspective) has kept the financial profile strong; hence, benefiting the ratings. Extended working capital requirements keep short-term borrowings somewhat high. Sufficient cash flows stabilizes coverages. Going forward, the management would continue to exploit better margins from distillery operations, while sugar segment profitability is mainly dependent on the government support to ease domestic stocks and pick-up in international prices.
The ratings are dependent on the sustained business volumes and margins of sugar, ethanol and terminal division. Strategic plan regarding asset build up (expansion and/or diversification) and related leveraging plan needs to be drawn. Resolution of shareholders’ dispute, though lately it has diluted significantly, remains integral to the growth of the company. The company has build equities investment portfolio. although this brings potential of dividends and capital gains, respective market risk has to be attended diligently.
Al-Abbas Sugar Mills Limited was incorporated in May 1991 and is listed on Pakistan Stock Exchange. The company has diversified businesses of sugar, ethanol and storage tank terminal. The business include a) Sugar capacity of 7,500 M. tons per day, b) Ethanol-capacity 172,500 liters per day, and c) Storage tank terminal-capacity of 22,850 M. tons per month. It operates in two different locations at Mirpurkhas and Dhabeji in Sindh. 58% of Al-Abbas Sugar's shareholding lies with Haji Ghani Group, which enjoys strong presence on the board. Jahangir Siddiqui (JS) group (27%) is the other major shareholder.
Mr. Asim Ghani, who has been associated with the company since long and lastly was an executive director, has recently taken over the position of CEO. He is supported by an experienced management team.